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Hyundai supports LCT end

Ignited debate: Hyundai’s chief operating officer, Scott Grant, has likened the effect of luxury car tax to the backlash to changes in tobacco retail regulations.

Transitioning auto industry could follow tobacco industry trend, says Hyundai

1 Sep 2016

HYUNDAI Motor Company Australia (HMCA) has warned that the local automotive industry is in an unstable state of flux and if the government does not handle the transitional period from Australian manufacturing to an import-only market carefully, customers will suffer the consequences.

The South Korean car-maker’s Australian chief operating officer Scott Grant has highlighted recent hot topics of the luxury car tax (LCT), warranty relevance and data sharing as examples of key areas that could be better managed if the Australian state and federal governments shift their focus.

With a range of more affordable models in most cases, Hyundai is not one of the manufacturers that has been hardest hit by Australia’s LCT, which was introduced in 2000.

Despite the advantage, Mr Grant said he supports the abolition of the LCT and likened its effect on the automotive companies to the tobacco industry and the government’s decision to apply heavy taxes and drab universal branding with graphic health warning to packaging.

“It wouldn’t bother us. I think it should go because I think tax is not helpful,” he said.

“The word we are getting is that the luxury car tax and the car industry generally is becoming a little bit like cigarettes now. We’re so unpopular on one hand because of the tall poppies and some other issues.

“You can do anything you want to a pack of cigarettes now. You don’t face any backlash except from people who smoke and they don’t really care about them too much. You can slug them all you like because the general perspective in the market – that the government is fearful of – is that its a huge impost on the health system and people shouldn’t be doing it.

“The car industry without local manufacturing is a bit like that. The car industry is subject to the government pushing it and potentially expanding the luxury car tax. Taking more tax out of the industry, not reducing it, because who’s going to complain.”

Mr Grant also highlighted other areas he believes require attention, including the relevance of new-car warranties. Australian consumer consumer law (ACL) requires all manufacturers to offer a new-vehicle warranty but Mr Grant explained that the real-world value of warranties has been exceeded by its more powerful influences.

“The ACCC has written to a number of manufacturers and we are one of them about the way we handle customers and warranties. The Australian Consumer Law (ACL) is really a higher level than warranties that car companies offer. So warranties, in a practical sense, actually don’t do that much any more because we need to comply in looking after consumers under the ACL.”

That said, Mr Grant explained that warranties still fulfilled a marketing role.

“However, warranties have great value in terms of the consumer’s mindset and from a marketing point of view ... it has some sort of benefit for the customer when making a purchase decision, but in reality it makes no difference in respect to the ACL. The government declares through the ACL, about products being fit for purpose.

“The evaluation that is taken by the ACCC (Australian Competition and Consumer Commission) in these matters is whether it is reasonable in its performance.

“Like a lot of government regulation, there’s lots of words written by lawyers as you would imagine, but it’s not very definitive and open to interpretation.”

In a bid to assist after-market businesses and independent repairers, new regulations were passed last year requiring the major marques to share vehicle technical information when requested. At the time the revision caused a rift in the industry but Mr Grant said the move appears to have been unnecessary.

Mr Grant criticised the Australian Automotive Aftermarket Association (AAAA) executive director Stuart Charity who claims car-makers have tried to hobble the arrangement and its effectiveness in levelling the playing field.

“One of the other arguments has been about the sharing of technical information, which has been available for some time and yet Stuart Charity claims the industry won’t cooperate and is, in fact, holding back and withdrawing information from independent repairers, and that ultimately is meaning less competition in the market and the consumer is worse off.

“We’ve complied since day one and we’ve had two inquiries in 18 months. The independent repairers have not used the systems and the access they have been given.

“Those are the kinds of things that are happening that are not well balanced.”

Mr Grant concluded with the sobering prediction that some brands that do not have the momentum of Hyundai may be looking at the challenging Australian environment and considering pulling up stumps in the notoriously competitive market.

“All of the car companies are part of a global machine and ultimately many look at each country and (monitor) what are we putting into the market and what does it cost us and every company only has so many resources.

“It’s possible that if things are difficult, some brands may pull out of Australia … the cost or risk of business in Australia or a particular incident may be too much for some. Absolutely that’s possible.

“If you embrace it and integrate what’s required into your process you become better as an organisation, but there are a couple of significant government policy-related issues that sit behind all this and the fear that I have is the intellect of government to fully grasp the issues and to make the appropriate decisions.

“It’s an interesting time”.

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